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How do I prevent liquidation of my collateral

When you apply for an EasyCredit loan, you agree to pledge all securities in your selected investment accounts/s. the value of your loan has been provided on the basis of the value of your qualifying collateral (see list here).


We allow you to take a loan at 33% of the loan-to-value (LTV) of your portfolio. This represents the ratio of how much you are borrowing, vs how many qualifying investments you have. 

If you sell any of the qualifying investments on which the loan has been provided on the basis of, or if the market declines and/or your qualifying investments decrease, the ratio of your loan to qualifying securities (loan-to-value) will change. A portion of the sale proceeds will be used to partially settle your loan.

We allow for some leeway with that. We allow you to go up until 48% loan-to-value of your portfolio, but after that point, we will take action to recoup the difference between your original loan amount (33%) and the loan amount you now qualify for.

Example:

You loan R33 from R100 worth of qualifying investments.

You then sell R20 of your qualified investments.
 R6.60 (R20.00 x 33%) (formula: trade value x current LTV %) will be recouped from the proceeds and used to reduce the loan amount. The outstanding loan will reduce from R33 to R26.40 and the LTV% will remain at 33% (26.40/R80).

If the market moves and as a result the value of your portfolio decreases putting your LTV% above 48% (R26.40 vs less than R55 of qualifying assets) the loan will be reduced at 33% LTV.
At this stage we will then either recoup funds from your free cash or, if not available, sell holdings from your qualified shares to bring the ratio back into an acceptable range.

 You’ll be able to view where you stand in terms of this ratio (at risk or in breach) within your EasyCredit platform.

NB: It’s important to keep the above in mind if you have pledged investments in your TFSA account as part of applying for your loan. This means that the investments in your TFSA can be sold to recoup funds in order to bring your LTV ratio back to 33%. 

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